We understand that this isn’t always a choice – while many people choose to contract through an Umbrella company, others are pushed down the route by redundancy or availability of jobs. Whether you have taken the conscious decision to work through an Umbrella or find yourself looking at Umbrella employment without a clear idea what that means, we hope this guide will give you a better understanding of how it all works.
If you expect to be contracting longer-term or will be on a high-income contract, a Limited Company might be the better option for you. Check out our handy guide to Umbrella or Limited if you are unsure.
What is Umbrella employment?
In brief, an Umbrella Company acts as your employer for a series of freelance assignments. As an employer, they provide you with the same rights as a permanent employee – sick pay, maternity pay, holiday pay, insurance, pension and so on.
When they pay you, an Umbrella is responsible for all taxes and National Insurances due. They will also update HMRC with your income and tax details – so if you are only working through an Umbrella, you won’t need to complete a tax return (unless requested by HMRC) or do anything else to keep your tax affairs in order.
The Umbrella acts as an intermediary between you and your client or agency. This means that you hold a contract with the Umbrella and the Umbrella holds a separate contract with the agency or client.
For more in-depth information, have a read of our comprehensive guide to how an Umbrella company works.
What are the first steps?
You will need to register with an Umbrella Company. Fortunately, this is a quick process as they will take care of almost everything for you.
When registering, the Umbrella will need to see ID to prove you have the right to work in the UK. They will also require your personal details and bank details – just like any employer. Finally, you will have to sign a contract of employment. This is a generic contract known as an Overarching Contract of Employment – it allows the Umbrella to employ you for work you do through any agency or client.